Since
2003, the state has asked Amazon for detailed records of what North Carolina
customers were purchasing on the site in order to collect sales use taxes,
which amounted to about $50 million. Amazon gave this information to the state
without including the customers'
personal information such as their name and address, but the
North Carolina Department of Revenue started to demand this information as well,
which led to the legal battle.

The
American Civil Liberties Union joined Amazon in their fight to protect customer
information when the online retailer refused to violate the privacy of its
customers.

"The
N.C. Department of Revenue does not need access to private customer records
that reveal which specific customers in North Carolina have ordered which
specific books, music or movies in order to complete its audit of Amazon and
collect any taxes owed," said Jennifer Rudinger, executive director of the
American Civil Liberties Union of North Carolina. "We are pleased that the
public's First Amendment rights have been upheld by this settlement, which
prohibits the department from seeking this kind of information from Amazon or
other Internet retailers in the future."

A
representative for the North Carolina Department of Revenue argued that the
state was never really interested in its citizens' buying patterns.

"The
case between the North Carolina Department of Revenue and Amazon has long been
twisted into something it is not," said Beth Stevenson, spokeswoman for
the North Carolina Department of Revenue. "Bottom line, this is about
fairly collecting the tax that is due to the state of North Carolina and
nothing more. The Department has always maintained that we do not need - or
want - titles or similar details about products purchased by Amazon customers.
The department voluntarily destroyed the detailed information that Amazon
unnecessarily provided and offered them the opportunity to comply with the
state tax laws moving forward.

"The
lawsuit on this particular issue could have been avoided altogether if not for
the aggressive stance Amazon took to
avoid compliance with North Carolina's tax laws. There would have never been an
issue of customer privacy if Amazon would simply collect the North Carolina
sales tax that others already do."

U.S.
District Judge Marsha Pechman ruled last October that the North Carolina
Department of Revenue had overstepped its boundaries with its request for
personal information, and noted that there is "no legitimate need"
for them to have such information.

"The
fear of government tracking and censoring one's reading, listening and viewing
choices chills the exercise of First Amendment rights," said
Pechman.

According
to Rudinger, Amazon was not part of the settlement, and it was unclear
whether Amazon's lawsuit regarding
the state's audit was pending on appeal.

In
addition to Amazon, the North Carolina Department of Revenue is also facing
lawsuits from many online travel companies such as Travelocity.com,
Travelscape, Hotels.com, Trip Network Inc. and Orbitz due to the state and
counties' tendencies to "arbitrarily change the contracts" they have
with hotels in North Carolina.

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